TaxTMI 
TaxTMI 
2022 (5) TMI 650
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....application of Rule 6 of the CENVAT Rules to clearance of LPG, which was produced as joint petroleum product with other dutiable petroleum product by chemical reaction/fraction of common blend of raw material is proper?" (ii) "Whether the Hon'ble Tribunal was right in holding that the Respondents are not required to pay any amount under Rule 6(3) of Cenvat Credit Rules, 2004 in respect of LPG cleared under exemption under PDSP?" (iii) "Whether the Hon'ble Tribunal was right in allowing additional new grounds filed by the Respondents that Liquefied Petroleum Gas is a Byproduct and therefore Rule 6 has no application in the case of Liquefied Petroleum Gas?" (v) "Whether the Hon'ble Tribunal was right in holding Liquefied Petroleum Gases as a byproduct of petroleum refinery and not as a joint product with other petroleum products that emerge by chemical reaction/fraction of common blend of raw material?" 2. It appears from the materials on record that a notice dated 26.10.2016 was issued to the respondent calling upon to show cause as to why the refund claim towards the Excise duty of Rs.8,31,32,211/- filed dated 28.07.2016 should not be rejected. The claim towards ....
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....iance Industries Ltd. Jamnagar, vide their reference No. RIL/JMN/Refinery/LPG Refund/201516/686 dated 28.07.2016 is rejected. The Show Cause Notice No. LTU/MUM/G:LT-3/RIL/Refund/JMN/185/2016-17 dated 26.10.2016 issued by the Assistant Commissioner, Central Excise & Service Tax, (GLT-3) L.T.U., Mumbai is disposed off in above terms. (Manjunatha T.) Deputy Commissioner CGST & Central Excise Division-1, Jamnagar" 5. The respondent went in Appeal before the Commissioner. The Appeal came to be allowed. The pivotal issue before the Commissioner was whether the respondent was entitled for the refund of the CENVAT Credit Reversed / Paid for the inputs attributable to the LPG in terms of Rule 6(3A) of the Rules, 2004. While allowing the Appeal, the Commissioner held as under: "7.4 I find that the lower adjudicating authority has relied on decision of the Hon'ble CESTAT, Ahmedabad in the case of Essar Oil Limited reported as 2017 (345) ELT 645 (Tri. Ahmd.) wherein it is held that the judgment of the Hon'ble Rajasthan High Court in the case of Hindustan Zinc Limited relied upon by Essar Oil Limited is not applicable since the factual matrix of the reported upon case was diffe....
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.... of which were cleared on payment of central excise duty and part of which were cleared under exemption subject to clearance of LPG to household domestic consumers at subsidized price under LPG Subsidy Scheme, 2002. I also find that the Hon'ble CESTAT in the case of Tanfac Industries Limited reported as 2010 TIOL 1299-CESTAT-MAD has held that when the goods manufactured by the assessee are excisable and the same are cleared to certain categories of customers under exemption Notification, provisions of Rule 6 are not attracted as the rule requires manufacture of two categories of products, one excisable and the other exempted. Similarly, the Hon'ble CESTAT in the case of Goyal Proteins Limited reported as 2015 (325) ELT 165 (Tri. - Del.) has held that when compliance of a provision is impossible, an assessee cannot be penalized for his failure to comply with the same. I further find that under erstwhile Rule 57CC of Central Excise Rules, 1944, a singular expression i.e. 'any final product' was used at the first place and therefore, there was a need to specifically use another singular expression i.e. 'any other final product' at the second place, however, in ....
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.... & unit (FCCU), platformer unit etc. in these process it is not as if respondent had set out to manufacture LPG. The same arises in the refining process and that the same could not have been limited or curtailed the production of LPG nor could have been manufactured other value added products using a less quantity of input of input services as whether the LPG then or otherwise. The quantum of input and input services will not get reduced even if LPG is not generated with main products. The same quantity of input and input services is required and indeed used for the manufacture of motor sprit (MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil. Therefore, the input and input services of such dutiable product the Cenvat Credit on such input and input services cannot be curtailed or reduced by applying rule 6 (1), 6 (2) and 6 (3A) of Cenvat Credit Rules, 2004. In this undisputed facts when the entire quantity of input and input services was required for manufacture of dutiable finished goods and when LPG emerged inevitably without any deliberate attempt to manufacture it, the provision of Rule 6 (1) was not violated in any manner. 4.6 The identical issue has....
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....redit is availed of is used by the respondent for the manufacture of Gelatin. Considering the process of manufacture adopted by the respondent, it is not possible to manufacture Gelatin without corresponding production of Mother Liquor This Mother Liquor which otherwise is in the nature of a waste product, is used by the respondent assessed for the manufacture of Di-Calcium Phosphate. 8. Thus, on a plain reading sub-rule (1) of rule 6, it is apparent that CENVAT credit is admissible in respect of the inputs used in the manufacture of dutiable goods and is inadmissible on such quantity of inputs which is used in the manufacture of exempted goods, Sub-rule (2) imposes an obligation on the manufacturer who manufactures final products and exempted goods from the common input to maintain separate accounts for receipt, consumption and inventory of inputs. Examining the applicability of the aforesaid rules to the facts of the present case, as noted hereinabove, it is not as if more quantity of Hydrochloric Acid is used than that required for manufacturing Gelatin or that by using a smaller amount of Hydrochloric Acid, the production of Mother Liquor could be averted. In the manufacturin....
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....nufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt; consumption and inventory of input inventory of input meant for use in the manufacture of dutiable final products and the quantity of input meant for use in the manufacture of exempted products and take cenvat credit only on that quantity of input which was intended for use in the manufacture of dutiable goods. In the present case, the assessee has taken cenvat credit only on that quantity of input, which was intended for use in the manufacture of dutiable goods, therefore, also the question of invoking sub-rule (2) of Rule 6 of the Rules would not arise. 13. Insofar as reliance placed upon the decision of the Bombay High Court in the case of Commissioner of Central Excise, Thane-1 v. Nicholas Piramal (India) Ltd. (supra) is concerned, the same would have no applicability to the facts of the present case inasmuch as in the facts of the said case, common input had been consciously used in the manufacture of two final products, whereas in the facts of the present case, the input Hydrochloric Acid is used for the manufacture of Gelatin alone, however during the course of manufa....
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....y to the Respondent as the same can be invoked only where two different final products, one dutiable and other exempt, as held by Madras High Court in the case of CCE vs DCW - 2011 (274) E.L.T. 183. b. The object behind Rule 6 is to determine the quantity of input and input services that have gone in the manufacture of exempted goods. In this case inputs and input services required for manufacturing value added final products such as Motor Spirit, High Speed Diesel, Aviation Turbine Fuel, Naptha, etc are common with those for the manufacture of LPG and therefore applying the judgment in the case of CCE vs. Sterling Gelatin reported in 2011 (270) E.L.T. 200 (Guj.) no part of the cenvat credit needs to be reversed as the entire quantity of inputs and input services are required and actually consumed for the manufacture of dutiable final product. No incremental quantity of input and input services are required for producing the exempt final product. c. That Rule 6 is otherwise incapable of application as the point of time the inputs and inputs services are received it is impossible for any manufacturer to decide the exact quantity of input and input services that will get consumed....
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....ity of inputs or input services; and, b. LPG inevitably arises in the manufacture of the aforementioned value added products and that no incremental inputs or input services are used for the same. It is also relevant to note here that this Court has in the case of Sterling Gelatin held that the provisions of Rule 6 of CCR are inapplicable if the dutiable final product could not have been manufactured using a lesser quantity of inputs and input services. 13. In the case of Sterling Gelatin (Supra), the assessee therein had availed credit on hydrochloric acid, which was used in the manufacture of dutiable final product viz. gelatin as well as in the manufacture of exempted goods viz. Di-Calcium Phosphate. The issue before the Court was whether the assessee was required to pay an amount of 8%/10% of the value of exempted goods under Rule 6(3)(b) of the CCR. This Court, held that since the assessee could not have manufactured gelatin (dutiable final product) using a lesser quantity of hydrochloric acid, Rules 6(1) and 6(2) of the CCR would not come into play. The relevant observations of this Court are extracted herein below for ease of reference: "8. Thus, on a plain reading sub....
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....nufacture of dutiable final products and the quantity of input meant for use in the manufacture of exempted products and take cenvat credit only on that quantity of input which was intended for use in the manufacture of dutiable goods. In the present case, the assessee has taken cenvat credit only on that quantity of input, which was intended for use in the manufacture of dutiable goods, therefore, also the question of invoking sub-rule (2) of Rule 6 of the Rules would not arise." 14. It can be seen from the aforesaid extract that this Court did not rule out the applicability of Rules 6(1) and 6(2) of the CCR on the ground that the exempt product was a by-product, but has done so by observing that the assessee could not have used a lesser quantity of inputs and inputs for manufacture of its dutiable final product. 15. It is further submitted that the Apex Court has, in the case of in the case of CCE vs. National Organic Chemical Industries Limited, 2008 (232) ELT 193 (SC) held that if the dutiable final product could not have been manufactured using a lesser quantity of inputs, then the entire input must be attributed to having been used in the manufacture of the said dutiable fi....